Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

<p>On 14 May, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> announced earnings, a new Medium Term Management Plan called <strong><a href="https://www.japanpost.jp/en/ir/news/jpn/pdf/20210514_01.pdf" target="_blank" rel="noopener">JP Vision 2025</a></strong>, and an expected sale of shares of subsidiary <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> so that it would end up owning less than 50.00% after the ToSTNeT-3 sale to be conducted 17 May, and the placing of a certain number of shares in trust so that JPH's voting rights into JPI became 49.9%. </p><p>In the original <a href="https://www.japanpost.jp/en/ir/news/jpn/pdf/20210514_02.pdf" target="_blank" rel="noopener">announcement</a> of the expected sale of JPI shares, made with earnings and the Mid Term Plan announcement on 14 May, JPH said... </p><blockquote><p>The Company plans to utilize the funds earned from this disposal of shares for purposes such as the enhancement of corporate value of the Company and the Japan Post Group.</p></blockquote><p>On the 17th of May, the following business day, JPH sold that very large block of shares. </p><p>Yesterday after the close, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> announced that it had arranged the trust to take 559,900 shares of <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> (details in the discussion point <a href="https://www.smartkarma.com/insights/huge-japan-post-insurance-buyback-mooted-decks-cleared-time-to-buy" target="_blank" rel="noopener">here</a>) so that it only owned 49.90%, thereby lifting certain restrictions placed on JPI by the Postal Service Privatization Act and lifting certain reporting requirements on JPH under the Insurance Business Act because it no longer held more than 50% of an insurer.</p><div class="content-highlight"><p>Today after the close, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> made a Japanese-only <a href="https://www.smartkarma.com/insights/huge-japan-post-insurance-buyback-mooted-decks-cleared-time-to-buy" target="_blank" rel="noopener">announcement</a> that it would buy back up to 276,090,500 shares (6.14% of shares out) for up to ¥250 billion in a ToSTNeT-3 buyback conducted at ¥905.5/share on 11 June 2021 before the open. </p></div><p>In the <a href="https://www.japanpost.jp/group/governance/pdf/01.pdf" target="_blank" rel="noopener">Corporate Governance Report</a> published (in Japanese only) on 10 May 2021, the company outlined its policy of not favouring the major shareholder (the Finance Ministry owned 63.29% of shares out or creating a disadvantage for minority shareholders. The ToSTNeT-3 buyback is open to all, and therefore fits the goal of JPH being able to treat all shareholders equally. </p><p>And it leaves the shares in an interesting position.</p>

On 14 May, Japan Post Holdings (6178 JP) announced earnings, a new Medium Term Management Plan called JP Vision 2025, and an expected sale of shares of subsidiary Japan Post Insurance (7181 JP) so that it would end up owning less than 50.00% after the ToSTNeT-3 sale to be conducted 17 May, and the placing of a certain number of shares in trust so that JPH's voting rights into JPI became 49.9%. In the original announcement of the expected sale of JPI shares, made with earnings and the Mid Term Plan announcement on 14 May, JPH said... The Company plans to utilize the funds earned from this disposal of shares for purposes such as the enhancement of corporate value of the Company and the Japan Post Group.On the 17th of May, the following business day, JPH sold that very large block of shares. Yesterday after the close, Japan Post Holdings (6178 JP) announced that it had arranged the trust to take 559,900 shares of Japan Post Insurance (7181 JP) (details in the discussion point here) so that it only owned 49.90%, thereby lifting certain restrictions placed on JPI by the Postal Service Privatization Act and lifting certain reporting requirements on JPH under the Insurance Business Act because it no longer held more than 50% of an insurer.Today after the close, Japan Post Holdings (6178 JP) made a Japanese-only announcement that it would buy back up to 276,090,500 shares (6.14% of shares out) for up to ¥250 billion in a ToSTNeT-3 buyback conducted at ¥905.5/share on 11 June 2021 before the open. In the Corporate Governance Report published (in Japanese only) on 10 May 2021, the company outlined its policy of not favouring the major shareholder (the Finance Ministry owned 63.29% of shares out or creating a disadvantage for minority shareholders. The ToSTNeT-3 buyback is open to all, and therefore fits the goal of JPH being able to treat all shareholders equally. And it leaves the shares in an interesting position.

Japan Post Holdings BUYBACK - Recycling Sale Proceeds As Expected; No BIG Catalyst Yet

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> has seen a flurry of profit-taking in the past two weeks since it dramatically repurchased 30% of its shares outstanding in an overnight trade.</p><p>The shares now trade lower than they did the moment before the announcement. </p><p><a href="https://www.smartkarma.com/entities/dai-ichi-life-insurance" target="_blank" data-smartkarma-citation="entities:1109:1" rel="noopener">Dai Ichi Life Insurance (8750 JP)</a> is probably JPI's closest listed peer, and it is up 8.8% in the same period. </p><p>I would say that the stock and its holders are conspiring against me but that is not how things work.</p><p><em>Lots of discussion below the fold - index treatment, overhang, PBR accretion, and more.</em></p>

Japan Post Insurance (7181 JP) has seen a flurry of profit-taking in the past two weeks since it dramatically repurchased 30% of its shares outstanding in an overnight trade.The shares now trade lower than they did the moment before the announcement. Dai Ichi Life Insurance (8750 JP) is probably JPI's closest listed peer, and it is up 8.8% in the same period. I would say that the stock and its holders are conspiring against me but that is not how things work.Lots of discussion below the fold - index treatment, overhang, PBR accretion, and more.

Japan Post Insurance - A Surprising Selloff But Still A Buy

<p>In mid-December 2020, there were news reports which suddenly circulated suggesting <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> was planning to buy ¥300bn of its own shares, with the goal of making sure that <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a>'s ownership dropped below 50%.</p><p>This was discussed that day in <a href="https://www.smartkarma.com/insights/huge-japan-post-insurance-buyback-mooted-decks-cleared-time-to-buy" target="_blank" data-smartkarma-citation="insights:46429" rel="noopener">Huge Japan Post Insurance Buyback Mooted - Decks Cleared. Time To Buy</a> and re-upped three weeks later in <a href="https://www.smartkarma.com/insights/japan-post-insurance-update-three-reasons-to-buy-any-overhang-slightly-higher" target="_blank" data-smartkarma-citation="insights:46862" rel="noopener">Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher</a> just before the TOPIX FFW announcement. </p><p>Things have been quiet since then, but the Company has steadily made progress ticking off the matters which were part of the company's corrective action plan after the sales scandal of 2019-2020. Getting these things finalised effectively "proves" that the company is ready to be let loose of its parent company, but importantly, the corrective action plan was couched in terms that basically said the only good way forward was to have a better and more comprehensive product suite, which would require being free of the burdens of the "Approval System."</p><div class="content-remarks">
<p>In November of 2020, <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> ("JPH") CEO Masuda publicly described a JPH plan to lower its stake in <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> ("JPI") and <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a> ("JPB") to below 50% in the five year period to 2025.</p>
<p>In late April 2021, the government Panel on Postal Service Privatization (<a href="https://www.yuseimineika.go.jp/iinkai.html" target="_blank" rel="noopener">link</a>) submitted a report (Japanese only (<a href="https://www.yuseimineika.go.jp/iinkai/dai230/230_iken.pdf" target="_blank" rel="noopener">link1</a>, <a href="https://www.yuseimineika.go.jp/iinkai/dai230/230_iken_gaiyo.pdf" target="_blank" rel="noopener">link2</a>)) to Prime Minister Suga which urged <a href="https://www.smartkarma.com/entities/japan-post-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:359:1" rel="noopener">Japan Post Holdings (6178 JP)</a> to lower its equity stakes in its two financial units - <a href="https://www.smartkarma.com/entities/japan-post-insurance-co-ltd" target="_blank" data-smartkarma-citation="entities:840:1" rel="noopener">Japan Post Insurance (7181 JP)</a> and <a href="https://www.smartkarma.com/entities/japan-post-bank-co-ltd" target="_blank" data-smartkarma-citation="entities:838:1" rel="noopener">Japan Post Bank (7182 JP)</a> to or below 50 pct between fiscal 2021 and fiscal 2025. It also asked the JPH to make a plan to sell ALL of its shares in the subsidiaries.</p>
</div><h2>The NEW News</h2><p>Today, with full-year earnings, Japan Post Insurance announced a buyback of up to 162,906,300 shares (29.0%) spending up to ¥439.8bn. This will be done in a ToSTNeT-3 transaction Monday morning. Japan Post Holdings announced they would sell a similar number of shares into the buy order, and would sell an additional 400,000 shares held in a trust. By so doing, the percentage of Japan Post Insurance voting rights held by Japan Post Holdings would drop to 49.90%. </p><p>That's it. </p><p>A HUGELY accretive buyback leads to a huge business opportunity for a hugely undervalued life insurer (about to become substantially more undervalued on Price/EEV terms) which has been handcuffed for its whole existence. </p><p><em>What more do you want?</em></p>

In mid-December 2020, there were news reports which suddenly circulated suggesting Japan Post Insurance (7181 JP) was planning to buy ¥300bn of its own shares, with the goal of making sure that Japan Post Holdings (6178 JP)'s ownership dropped below 50%.This was discussed that day in Huge Japan Post Insurance Buyback Mooted - Decks Cleared. Time To Buy and re-upped three weeks later in Japan Post Insurance Update - Three Reasons To Buy. Any Overhang Slightly Higher just before the TOPIX FFW announcement. Things have been quiet since then, but the Company has steadily made progress ticking off the matters which were part of the company's corrective action plan after the sales scandal of 2019-2020. Getting these things finalised effectively "proves" that the company is ready to be let loose of its parent company, but importantly, the corrective action plan was couched in terms that basically said the only good way forward was to have a better and more comprehensive product suite, which would require being free of the burdens of the "Approval System."
In November of 2020, Japan Post Holdings (6178 JP) ("JPH") CEO Masuda publicly described a JPH plan to lower its stake in Japan Post Insurance (7181 JP) ("JPI") and Japan Post Bank (7182 JP) ("JPB") to below 50% in the five year period to 2025.
In late April 2021, the government Panel on Postal Service Privatization (link) submitted a report (Japanese only (link1, link2)) to Prime Minister Suga which urged Japan Post Holdings (6178 JP) to lower its equity stakes in its two financial units - Japan Post Insurance (7181 JP) and Japan Post Bank (7182 JP) to or below 50 pct between fiscal 2021 and fiscal 2025. It also asked the JPH to make a plan to sell ALL of its shares in the subsidiaries.
The NEW NewsToday, with full-year earnings, Japan Post Insurance announced a buyback of up to 162,906,300 shares (29.0%) spending up to ¥439.8bn. This will be done in a ToSTNeT-3 transaction Monday morning. Japan Post Holdings announced they would sell a similar number of shares into the buy order, and would sell an additional 400,000 shares held in a trust. By so doing, the percentage of Japan Post Insurance voting rights held by Japan Post Holdings would drop to 49.90%. That's it. A HUGELY accretive buyback leads to a huge business opportunity for a hugely undervalued life insurer (about to become substantially more undervalued on Price/EEV terms) which has been handcuffed for its whole existence. What more do you want?

Japan Post Insurance - It's ON! Buyback, Huge Accretion, Restrictions Lifted. What's Not To Like?

David Blennerhassett

Last Week in Event SPACE:  Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

Pan-Asia Index Flows & Special Situations, Quiddity Advisors

Janaghan Jeyakumar, CFA

Pan-Asia Index Flows & Special Situations

<div><p>JPX-Nikkei 400 is composed of common stocks listed in the First Section, Second Section, MOTHERS Market, and the JASDAQ Market of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents that are selected based on several factors including market capitalization, trading value, operating profits, and ROE.</p></div><div><p>A periodic review will be conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review will be conducted using the final business day of June as the base date. </p></div><div><p>Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event. Below is a discussion on the latest adjustments required for the basket portfolio for the 2021 Rebalance based on April-end data. </p></div>

JPX-Nikkei 400 is composed of common stocks listed in the First Section, Second Section, MOTHERS Market, and the JASDAQ Market of the Tokyo Stock Exchange. This is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents that are selected based on several factors including market capitalization, trading value, operating profits, and ROE.A periodic review will be conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. This review will be conducted using the final business day of June as the base date. Quiddity provides quantitative research on pre-event basket strategies surrounding this Index Rebalance event. Below is a discussion on the latest adjustments required for the basket portfolio for the 2021 Rebalance based on April-end data. 

JPX-Nikkei 400 Rebalance 2021: Pre-Event Basket Adjustments for April-End

Japan

Japan Post Insurance Co. Ltd. operates life insurance business. The Company offers whole life insurance, education endowment, ordinary endowment, medical insurance, and special endowment insurance. Japan Post Insurance provides services for individuals and businesses throughout Japan.

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Japan Post Insurance (7181 JP)

Japan Post Holdings BUYBACK - Recycling Sale Proceeds As Expected; No BIG Catalyst Yet

JPH sold JPY 358bn of shares in JPI, and now is spending 70% of that to buy back its own shares from the govt. That is good, but it should do...

Travis Lundy

Japan Post Insurance - A Surprising Selloff But Still A Buy

Japan Post Insurance has bought back 29% of its shares and EPS, book value, and EEV accretion is immense, but the shares have underperformed rival...

Travis Lundy

Japan Post Insurance - It's ON! Buyback, Huge Accretion, Restrictions Lifted. What's Not To Like?

Japan Post Insurance has announced a 29% buyback, the JPH selldown, the imminent end to Postal Privatization Act restrictions. And it can get some...

Travis Lundy

Last Week in Event SPACE: Swire, Hitachi Metal, Jardine, Softbank, Bingo, Japan Asia, Mainstream

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

JPX-Nikkei 400 Rebalance 2021: Pre-Event Basket Adjustments for April-End

JPX Nikkei 400 2021 Rebal Pre-Event L/S Basket +2.9% in April (thru the 28th). The 30th is rebal day for readers. 2 potential deletes and 7...

Janaghan Jeyakumar, CFA

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